Section 34A. The commonwealth, acting by and through the department, may enter into a contract or contracts with a housing authority for state financial assistance in the form of annual contributions to assist projects financed by the MHFA which are leased in whole or in part by the said housing authorities to provide replacement housing units for, or relocation housing for occupants of, housing projects which are demolished, cleared, sold or otherwise disposed of pursuant to the provisions of this chapter. Such contract shall contain a provision that such annual contributions shall be used for the payment of interest on, and the principal of, mortgages held by the MHFA. The annual contributions for any one MHFA project shall be payable in an amount not exceeding six per cent of the cost of that portion of the project leased by such housing authority, as determined by the department, and for the fixed period during which said mortgage for such MHFA project remains outstanding, but in no event for more than forty years after completion of the MHFA project, as determined by the department; provided, however, that the total amount of such annual contributions contracted for by the commonwealth for any one year shall not exceed one hundred and ninety thousand dollars. Each such annual contribution by the commonwealth to the housing authorities shall be paid by the commonwealth to the housing authority for payment to the MHFA upon approval and certification by the state comptroller.

Each such contract shall provide:

(i) that whenever in any year the earned surplus accumulated by the mortgagor exceeds the amount permitted by section five of chapter seven hundred and eight of the acts of nineteen hundred and sixty-six, as determined by MHFA, an amount equal to that portion of such excess allocable to the units leased by such housing authorities shall be applied or set aside for application to purposes which shall effect a reduction in the amount of subsequent annual contributions, and

(ii) for enforcement by the department of such contract in the manner set forth in clause (e) of section thirty-four, and

(iii) that such annual contributions may be terminated by the department if the mortgagor in the judgment of MHFA ceases to operate the project in accordance with the requirements of chapter seven hundred and eight of the acts of nineteen hundred and sixty-six.

The full faith and credit of the commonwealth is hereby pledged to the payment of all annual contributions contracted for by the commonwealth. The provisions of section thirty-four shall not apply to such contracts for financial assistance, but each such contract shall contain such limitations as to the development cost of such MHFA projects and such administration and maintenance costs as the department may require. The amount of annual contributions contracted for by the commonwealth pursuant to this section shall reduce, pro tanto, the maximum amount of annual contributions authorized under the third and fourth paragraphs of clause (b) of section thirty-four.